Estimating High-Frequency Based (Co-) Variances: A Unified Approach
We propose a unified framework for estimating integrated variances and covariances based on simple OLS regressions, allowing for a general market microstructure noise specification. We show that our estimators can outperform, in terms of the root mean squared error criterion, the most recent and commonly applied estimators, such as the realized kernels of Barndorff-Nielsen, Hansen, Lunde & Shephard (2006), the two-scales realized variance of Zhang, Mykland & Aït-Sahalia (2005), the Hayashi & Yoshida (2005) covariance estimator, and the realized variance and covariance with the optimal sampling frequency derived in Bandi & Russell (2005a) and Bandi & Russell (2005b). For a realistic trading scenario, the efficiency gains resulting from our approach are in the range of 35% to 50%.
|Date of creation:||10 Jun 2008|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.au.dk/afn/|
References listed on IDEAS
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- Yacine Ait-Sahalia & Per A. Mykland, 2003.
"How Often to Sample a Continuous-Time Process in the Presence of Market Microstructure Noise,"
NBER Working Papers
9611, National Bureau of Economic Research, Inc.
- Yacine Aït-Sahalia, 2005. "How Often to Sample a Continuous-Time Process in the Presence of Market Microstructure Noise," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 351-416.
- Aït-Sahalia, Yacine & Mykland, Per A. & Zhang, Lan, 2011.
"Ultra high frequency volatility estimation with dependent microstructure noise,"
Journal of Econometrics,
Elsevier, vol. 160(1), pages 160-175, January.
- Yacine Ait-Sahalia & Per A. Mykland & Lan Zhang, 2005. "Ultra High Frequency Volatility Estimation with Dependent Microstructure Noise," NBER Working Papers 11380, National Bureau of Economic Research, Inc.
- Ait-Sahalia, Yacine & Mykland, Per A. & Zhang, Lan, 2005. "Ultra high frequency volatility estimation with dependent microstructure noise," Discussion Paper Series 1: Economic Studies 2005,30, Deutsche Bundesbank, Research Centre.
- Ole E. Barndorff-Nielsen & Peter Reinhard Hansen & Asger Lunde & Neil Shephard, 2006.
"Designing realised kernels to measure the ex-post variation of equity prices in the presence of noise,"
2006-W03, Economics Group, Nuffield College, University of Oxford.
- Ole E. Barndorff-Nielsen & Peter Reinhard Hansen & Asger Lunde & Neil Shephard, 2008. "Designing Realized Kernels to Measure the ex post Variation of Equity Prices in the Presence of Noise," Econometrica, Econometric Society, vol. 76(6), pages 1481-1536, November.
- Ole E Barndorff-Nielsen & Peter Hansen & Asger Lunde & Neil Shephard, 2006. "Designing realised kernels to measure the ex-post variation of equity prices in the presence of noise," OFRC Working Papers Series 2006fe05, Oxford Financial Research Centre.
- Neil Shephard & Ole E. Barndorff-Nielsen, 2006. "Designing realised kernels to measure the ex-post variation of equity prices in the presence of noise," Economics Series Working Papers 2006-W03, University of Oxford, Department of Economics.
- Zhang, Lan & Mykland, Per A. & Ait-Sahalia, Yacine, 2005.
"A Tale of Two Time Scales: Determining Integrated Volatility With Noisy High-Frequency Data,"
Journal of the American Statistical Association,
American Statistical Association, vol. 100, pages 1394-1411, December.
- Lan Zhang & Per A. Mykland & Yacine Ait-Sahalia, 2003. "A Tale of Two Time Scales: Determining Integrated Volatility with Noisy High Frequency Data," NBER Working Papers 10111, National Bureau of Economic Research, Inc.
- Christensen, Kim & Podolskij, Mark, 2007. "Realized range-based estimation of integrated variance," Journal of Econometrics, Elsevier, vol. 141(2), pages 323-349, December.
- Valeri Voev & Asger Lunde, 2007. "Integrated Covariance Estimation using High-frequency Data in the Presence of Noise," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 5(1), pages 68-104.
- Hansen, Peter R. & Lunde, Asger, 2006. "Realized Variance and Market Microstructure Noise," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 127-161, April.
- Griffin, Jim E. & Oomen, Roel C.A., 2011. "Covariance measurement in the presence of non-synchronous trading and market microstructure noise," Journal of Econometrics, Elsevier, vol. 160(1), pages 58-68, January.
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